This Very Effective Yet Often Ignored Sales Hack Can Save Save Millions For Your Business.
We did the math on how much a bad customer retention strategy can cost a business and the amount is huge!
For every business, sales are what ultimately drive it. That is really the point of existing, isn’t it?
The general thought process usually is, in the numbers. The more clients we acquire the faster we grow.
Here is where it gets tricky, especially for new businesses because in trying to acquire that many clients, they oftentimes fail to offer the service a customer expects when they buy from you.
A shocking statistic has emerged from some studies conducted over the years, revealing something crazy.
If we go way back to 1997, there was a report by the American Society for Quality Control, which found the following:
The customer was turned away by the indifferent attitude of company employees (68 percent)
The customer was dissatisfied with the product (14 percent)
The customer was lured away by competition (9 percent)
The customer was influenced by a friend to go elsewhere (5 percent)
This was a time where the internet was almost non-existent.
The amount of competition was way lesser.
Google and Amazon were yet to be born.
One customer hardly interacted with another unless they knew them.
Yet you can take note of how 5% of the customers were still influenced by friends to go elsewhere.
Now let’s look at a more recent survey about why new businesses lose customers.
A 2018 survey by McKinsey and Company revealed:
Only 13% of customers from a demographic were loyal to one particular brand.
87% of customers shopped around.
58% switched brands because they were lured away.
So, we at Social Ice dug a bit deeper into this report and found the #1 reason why the above report carries those numbers.
You guessed it, Poor Customer Experience.
If you compare 1997 to 2018, we live in an age where the number of people using cellphones having access to the internet is only growing.
All businesses are fighting for attention.
The conversation is no longer B2B or B2C, it is now C2C (Customer to Customer)
The customer is King. The internet has exploded the Marketplace and the customer has options even with the most complex buying decisions.
The idea is that if you go big and get noticed on social media people will buy from you. The only problem is everyone is trying to go big on Social Media.
That is why one of the holy grails of growing your business in today’s day and unfortunately still one of the most ignored is Customer Retention.
It has become critical, that when you do manage to get the customers’ attention, you make their experience the most unbelievable ever, not only because you are scared to lose them, but, each of these customers is also equipped to send another 100 customers your way or turn 100 customers away and it is up to you which one of these happen for your business.
Businesses over the years have exploded on to the scene with a notable focus on customer retention only.
Here are some examples of policies and quotes they follow they follow
“Historically, our number-one growth driver has been from repeat customers and word of mouth.” — Unknown
“Value-added promotes customer retention (they come back) but value-unique nurtures customer advocacy (they bring their friends).” –
“Rule 1: The customer is always right. Rule 2: If the customer is ever wrong, read Rule 1.” –
Here is why retaining one customer is important, and how you stand to lose even when one customer leaves your business for a reason you can control.
Assume the following
( In Rupees, if it is another currency the dollars would come to 50$)
Average spend per customer per month in your business = 3000
Amount of times a customer buys from you in a year = 10
The average revenue per customer per year = 30,000
Average customer life span buying from you = 10 years
Average revenue per customer per 10 years = 3,00,000
Now let’s take it one step further,
Assume the following
Number of customers for your business
Each month = 50 pax
Each Year = 600
For 10 years = 6000
Average revenue earned over 10 years = 18,00,00,000
If we were to go by the McKinsey Report,
If 58% of these customers leave you after the first purchase you incur a Loss of 10,44,00,000 over 10 years.
Not to forget, each of these customers is equipped to give you a lot more referrals where they send their friends to buy from you and also leave product reviews on social media.
If they just send 2 referrals to you each month and you convert even 1 of them, the potential revenue earned is 36,00,00,000
Hence, your potential revenue lost if 58% of customers leave stands at 20,88,00,000.
Given above is an example of what is possible if you have a good customer retention policy in place and also what is happening while you are going after only looking for new customers while not focussing on customer satisfaction and retention.
There isn’t even much you need to do really.
These 5 customer retention techniques will help you go that extra mile with your customers, whatever business you are in.
A phenomenal product that adds value (DUH)
Prompt Customer Support
Birthday and Festive Greetings
Warm and respectful service
Given above are just a tip of the iceberg, companies are investing millions in their customer retention strategies because that is where 80% of your business comes from.
This is not to advocate that you do not need to acquire more customers and more numbers, you absolutely have to go all out with content marketing and other marketing, but more often than not, this tends to get ignored which is why businesses lose an insane amount of money.
It doesn’t matter if you are a grocer or you have an App or you offer a service, locking in revenues for the year comes from customers being satisfied and having a reason to keep coming back.
Don’t chase after what you want, and in the bargain ignore what you have.
It always comes full circle, customer retention is a type of marketing in itself, where the customers themselves become ambassadors for your brand.
Think about it, it will make you a millionaire.